Casinos’ worrying knack for consumer manipulation

The spread of machine gambling offers a portent of other economic developments

What if the future of capitalism is not to be found in Shenzhen, Abu Dhabi or the Massachusetts Institute of Technology Media Lab – but in the Nevada desert? Natasha Dow Schüll, an anthropologist, has spent 15 years conducting field research in Las Vegas, culminating in a disturbing book, Addiction by Design. We are used to thinking of Vegas as a city of gaudy spectacle and the green baize of poker, blackjack and roulette tables. It is now a city of slot machines, which have grown like weeds because they are fantastically profitable. And the spread of machine gambling offers a worrisome portent of developments elsewhere in the economy.

Three slot-machine innovations stand out: first, confusion by design; second, addictiveness by design; third, the use of play money. All have been made possible by the digital automation of the machine itself, which in Las Vegas as elsewhere eliminates the skilled service jobs of croupiers and replaces them with highly paid jobs in interface design and low-paid work as a security guard or waitress.

Consider, first, confusion by design: Las Vegas casinos are mazes, carefully crafted to draw players to the slot machines and to keep them there. Casino designers warn against the “yellow brick road” effect of having a clear route through the casino. (One side effect: it takes paramedics a long time to find gamblers in cardiac arrest; as Ms Schüll also documents, it can be tough to get the slot-machine players to assist, or even to make room for, the medical team.)

Most mazes in our economy are metaphorical: the confusion of multi-part tariffs for mobile phones, cable television or electricity. My phone company regularly contacts me to assure me that I am on the cheapest possible plan given my patterns of usage. No doubt this claim can be justified on some narrow technicality but it seems calculated to deceive. Every time I have put it to the test it has proved false.

I recently cancelled a contract with a different provider after some gizmo broke. The company first told me the whole thing was my problem, then at the last moment offered me hundreds of pounds to stay. When your phone company starts using the playbook of an emotionally abusive spouse, this is not a market in good working order.

Another example is the way the pension providers charge for their services. Between the pensioner and the financial assets they are acquiring, it is almost impossible to figure out who is being charged for what. Even when annual charges are transparent, few people begin to grasp the vast sums such charges may cost them over the life of the product.

Now consider addiction by design. What is not understood about modern slot machines – certainly not by the UK’s Labour party, which recently tried to spark a moral panic on the subject – is that they do not try to drain your money away quickly. They do so slowly, by maximising “time on device”. The machines are cheap to run: what is the hurry? Machine gamers do not even play to win: they play to play. The aim of the machine is to deliver constant reinforcement – for instance, the “false win”, where a player is treated to fanfares and flashing lights after betting $3 and winning 60 cents.

Here, the natural analogy is with Facebook, Twitter and Google. These companies, ultimately, are selling one thing: our attention. Nothing about Facebook makes sense until you view it as a well-honed system for persuading you to check Facebook one more time.

Finally, consider the arrival of play money. A cutting-edge slot machine will not bother with a slot: the player will be attached umbilically via a casino charge-card on an elastic cord. This is partly a logistical matter: feeding machines with money, summoning a cashier to make change and cashing out jackpot wins all take time and interrupt a player’s flow.

But the substitution of cash for “credits” has a psychological effect too. Behavioural economists have shown that cash seems to have a bracing effect on our ethics and our judgment. Dan Ariely has found that we are willing to cheat for poker chips convertible into cash but less willing to be dishonest for naked cash itself. Drazen Prelec and Duncan Simester discovered a much higher willingness to pay for a good of uncertain value if the payment was made by credit card.

I would not wish to be too gloomy about all this. Most people do find a way to navigate through the maze of shopping malls and phone bills and loyalty cards and easy credit – the research of the economist Eugenio Miravete often shows people finding satisfactory deals against what look like insuperable odds. And the free market continues to deliver valuable products.

Nor is the right regulatory intervention always clear. Slot machines could be banned, I suppose – no doubt with unintended consequences – but the Vegas-isation of the everyday economy is not easily curbed with the stroke of a legislator’s pen.

Yet it is hard for a free-market enthusiast like me to look unblinkingly at Las Vegas, at row upon row of machines, designed by an elite and needing little human intervention, drawing in consumers, soothing them, entertaining them and eating their money – and not to feel that the invisible hand has slipped.

10 Comments

Joseph says:

Replace “Casinos” with “Mobile games”, and you get a perfect description of one of the fastest growing industries in the digital era. Mobile gaming has evolved from a for-pay product into a “Free-to-play” model which is surprisingly similar to a slot machine. The games are designed to maximize reinforcement, demand attention, and encourage compulsion that can border on addiction. Some of these games are well designed, where a patient player can get hours of enjoyment for free or a small payment, but there are others that prey on our well known instincts and compulsions to pull “just one more” purchase out of us.

Interesting read Tim. I’ve long considered ‘aggregator’ site (moneysupermarket et al) as confusion by design, making the huge process of buying, what in effect is often a pretty commoditised product (car insurance say), far more complex that required. A consequence seems to be (my own anecdotal evidence shows) that vast quantities of minutiae data hinders rather than helps, paralysing the decision-making process when a straight-forward chat with a broker (face-to-face or on the blower) does not. Perhaps this is an area where the rise of analytics will help, although it may just as easily add to the blanket of befuddlement.

World of Warcraft and other MMORPGs as well as “free to play” games again do a similar thing.

I’m not sure it is a case of the invisible hand slipping: people genuinely appear to find these activities satisfying and I’m reluctant to start specifying which essentially harmless leisure activities are okay. At some level though one has to be disappointed that the refinement of our civilisation has led to us discovering that our primitive instincts can be best fulfilled not by Aristotle but my mindless repetition and reward.

(The developments in capitalism post WW2 also seems to me to be another manifestation of this. Our primeval unhappiness at comparative poverty and joy at material advantage has been used as a machine to turn productivity gains into more work and more goods rather than increased leisure.)

Another company applying this maze-structure is IKEA. Funny how all their stores are built as a maze (with a couple of well-hidden short-cuts here and there). You have to go through the whole store all the time. A great trap for impulsive shoppers.

Btw, I never understood the appeal of slot machines. What is so fun about playing them? The thrill of winning? But then why not play some actual poker or something? Meh, I guess I’m not the target audience.

I was approached by a online slot machine company, looking for me to work for them, but, despite the generous pay and benefits, I couldn’t reconcile myself to the ethics of the industry.

I did try to persuade myself – I enjoy playing computer strategy games and find the best games addictive enough that I have spent hundreds of hours playing them (for a cost of around 16p/hour and falling). I figured that if people enjoy playing slot machines, and this costs them money, isn’t this the same as me paying for my games and enjoying playing them?

Of course, I expect that most players of slot machines spend, on average, considerably more than 16p/hour. But that is just a matter of scale. Most slot machines pay out 70% of the money put in as prize money. My mother plays the national lottery, which only pays out 50%, but I don’t hear of anyone is campaigning to ban that. (Perhaps it helps if you think of it as a donation to a really badly run charity, with 50% cashback).

I don’t think the problem is the addictive nature of the slots. I’ve probably played a lot more Civ V than I would really have liked to, but still don’t regret buying it. I can quit any time. Just not until after this next turn.

No, I think the problem is the fundamental dishonesty of slots. Despite all the notices saying they only pay out 70% of money spent, they hold out the promise of winning big, but it never works out that way. Actually, that’s not quite true. I’ve played slot machines twice, and won. (Can’t remember how much, but it was more than I put in. £6 I think). I also played the national lottery, and won (£14 after the cost of the tickets).

But the key here was that in both cases I walked away while I was ahead, and never went back. That is what their typical customers fail to do. To do the job well, I would have to design systems that ensure those customers couldn’t walk away, but would keep coming back and paying for their dopamine hit.

It is an interesting piece but the “addiction by design” hypothesis is one we can test. The book is based upon 15 years looking at gambling and gamblers in Las Vegas and the theory that over this period machines have been improved to make them more addictive.

At the same time (well OK over the past 30 years)access to casino gambling of this type has risen from 3 states to 33 states. Yet over that time problem gambling rates in the US have fallen not risen. if these machines increase addiction by design why is it that when we measure that addiction it has fallen?

In the UK we have some of the best data on PG rates. In 1999 before we had these machines on our high streets the problem gambling rate was 0.6%, in 2007 when they were ubiquitous and we had over 30,000 on our high streets the problem gambling rate was still 0.6% The latest figures for 2012 show a PG rate of either 0.5% or 0.4% depending upon which diagnostic screen is used.

It is a strange addiction by design process that sees no rise in addiction.

We could all pretty much survive on very plain food (raw vegetables supplemented occasionally by meat) drink only water and live in a single room shack. Everything else could be described as a luxury in that it is not needed for us to live. So what is different morally about making and selling champagne versus making and selling gambling products. Both are unnecessary to most people, yet one is generally approved of, the other disapproved. I suspect it is simple snobbishness, gambling is seen as a lower class (both intellectually and also socially) than drinking champagne. It probably also is a desire, seemingly strongest in Oxbridge educated people, to make decisions for other people.

I wish you were right Chris. However, the regret I might feel for spending a rare sunny day playing Civilization, or nursing a Champagne-caused hangover, is nothing compared to the regret felt by someone that has spent all their money and maxed out their credit card playing online slots.

All of these activities can be described as compulsive in that there is a strong temptation to spend a little more time doing them. The difference with gambling (and especially online gambling) is the ease at which someone can end up unable to pay their electricity bill or their rent, and thus end up in that one-room shack drinking water.